Dish Network 1998 Annual Report Download - page 7

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Subscriber Management. We presently use a third-party software system for DISH Network subscriber
management and billing functions. We are currently negotiating a new, multi-year contract for subscriber management
services and expect to sign a contract during the first half of 1999.
Sales and Marketing
EchoStar receiver systems and DISH Network programming services are currently marketed by
approximately 18,000 independent distributors, retail stores and consumer electronics. The majority of DISH
Network satellite systems were purchased by subscribers from our independent dealers. These independent dealers
are primarily local retailers who specialize in TV and home entertainment systems. We intend to enhance consumer
awareness of our products by forming alliances with nationally recognized distributors of other consumer electronics
products. We formed a strategic alliance with JVC in May 1997. JVC now distributes our receiver systems under the
JVC label through certain of its nationwide retailers.
Through our direct sales efforts, customers can call a single telephone number (1-800-333-DISH) 24 hours a
day, seven days a week, to order EchoStar receiver systems, activate programming services, schedule installation and
obtain technical support. We believe that we are presently the only DBS provider to offer a comprehensive,
single-point customer service function.
We offer our distributors and retailers a competitive residual, or commission, program. The program pays
qualified distributors and retailers an activation bonus, along with a fixed monthly residual for programming services
provided over the period that the respective DISH Network subscriber remains active.
We use regional and national broadcast and print advertising to promote the DISH Network. We also offer
point-of-sale literature, product display, demonstration kiosks and signage for retail outlets. We provide guides to our
dealers and distributors at nationwide educational seminars and directly by mail, that describe DISH Network
products and services. Our mobile sales and marketing team visits retail outlets regularly to reinforce training and
ensure that point-of-sale needs are quickly fulfilled. Additionally, we dedicate one DISH Network channel to
providing information about special services and promotions that we offer from time to time.
Our future success in the subscription television industry depends on our ability to acquire and retain DISH
Network subscribers, among other factors. Beginning in 1996, to stimulate subscriber growth we reduced the retail
price charged to consumers for EchoStar receiver systems. Accordingly, since August 1996, we have sold our
receiver systems to DISH Network subscribers below the manufactured cost. We developed these marketing
promotions to rapidly build our subscriber base, expand retail distribution of our products, and build consumer
awareness of the DISH Network brand. These programs emphasize our long-term business strategy of maximizing
future revenue by selling DISH Network programming to the largest possible subscriber base and rapidly increasing
the size of that subscriber base. Since we subsidize our receivers, we incur significant costs each time we acquire a
new subscriber. Assuming subscriber turnover remains at or near existing levels, we believe that we will be able to
fully recoup the up-front costs of subscriber acquisition from future subscription television services.
Our marketing strategy is based on current competitive conditions. If competition increases, or we
determine for any other reason that it is necessary to increase our subscriber acquisition costs to attract new
customers, our profitability and costs of operation could be adversely affected.
Satellites
EchoStar I and EchoStar II each have 16 transponders that operate at 130 watts of power. Subject to the
anomalies described below, EchoStar III and EchoStar IV each have 32 transponders that operate at approximately
120 watts per channel, switchable to 16 transponders operating at over 230 watts per channel. Each transponder is
capable of transmitting multiple digital video, audio and data channels. Each of our satellites were designed to
operate for a minimum of 12 years. From these four satellites, we have the capacity to provide a total of over 400
channels of video and audio programming.
During 1998, three transponders on EchoStar III malfunctioned, resulting in the failure of a total of six
transponders on the satellite. While a maximum of 32 transponders can be operated at any time, the satellite was